Despite growing deficits, the debt-ceiling debate, bank bailouts and more business regulations to fight global warming and other bugbears, one of the few bright spots this year is the surprise rally in technology stocks. Our technology stocks and funds have taken full advantage. We like the Baron Growth Fund (BGRFX) in particular, educates Mark Skousen, editor of Forecasts & Strategies.
So far, government regulators haven’t interfered with the success of new technologies, such as the development of artificial intelligence (AI), self-driving cars, speech recognition and strategy games. I hope we can elect better political leaders in 2024, but until then, I prefer our conservative, well-diversified portfolio of growth and income stocks and funds.
Meanwhile, the Federal Reserve is famous for overdoing it on both sides. It engages in “easy money” policies for far too long and then pushes interest rates too high when it decides to “fight inflation.”
This cycle is no different. From 2009 until 2022, the Fed kept interest rates near zero, creating an artificial boom in stocks, real estate, and the economy. Then, when inflation raised its ugly head after the 2020-21 COVID-19 panic, Chairman Jay Powell and the Fed governors reversed course, imposing a tight money policy that has gone too far too fast.
In the past year, the Fed has raised its fed funds rates 10 times, faster than any other period since 1980. The quantity of money is also declining for the first time in decades.
As a result, we are witnessing a bear market on Wall Street, a potential recession and a banking crisis that won’t go away. But Jay Powell’s attitude is, “What, me worry?”
Still, the tech-laden Nasdaq has advanced over 20% year to date. BGRFX declined slightly last month, but is still ahead around 8% year to date.
Managed by Ron Baron and Neal Rosenthal, its top holdings include Factset Research, Guidewire Software, Arch Capital, MSCI, Gaming and Leisure Properties and Choice Hotels. Only Vail Resorts is down for the year. The rest are up substantially.
Recommended Action: Buy BGRFX.
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